Order block
Also called OB. What it means, how it looks on a gold (XAUUSD) chart, and the mistake most traders make with it.
Order block: An order block is the last opposite-colour candle before a strong move that breaks structure. A bullish order block is the last down candle before a rally; a bearish one is the last up candle before a sell-off. Traders expect price to react when it returns there.
Order block on a gold chart
If gold drops to $4,080 on the 1-hour chart, prints a red candle from $4,092 to $4,082, and then rallies to $4,130 breaking the previous high, that red candle ($4,080–$4,094 including wicks) is the bullish order block. A return to it is a potential buy area.
How traders use it
The order block is only valid if the move away from it broke structure and left a fair value gap. Traders enter at the top of the block or its 50% level (the mean threshold) with the stop beyond the block's far side.
Common mistake
Calling any candle before a move an order block. Without a break of structure and displacement, it is just a candle. Old blocks that price has already traded through lose their meaning.
Questions
What does order block mean in trading?
An order block is the last opposite-colour candle before a strong move that breaks structure. A bullish order block is the last down candle before a rally; a bearish one is the last up candle before a sell-off. Traders expect price to react when it returns there.
How is order block used on gold (XAUUSD)?
The order block is only valid if the move away from it broke structure and left a fair value gap. Traders enter at the top of the block or its 50% level (the mean threshold) with the stop beyond the block's far side.
What is the mean threshold of an order block?
The 50% level of the order block's body. Many traders expect a valid block to hold above it; a close through it weakens the setup.
Educational content, not financial advice. Every concept here is a probability, not a guarantee.
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